Quite recently, Canada's federal Human Resources Department was rocked
by allegations that up to $1 billion of grant handouts have been poorly
accounted for and seem to have vanished with few traces. The sloppy accounting
is undoubtedly inexcusable, but critics who focus almost exclusively on
that aspect of the issue miss an important point: why were such large
sums of taxpayers' money doled out in the first place? If the books had
been completely in order, would Jane Stewart, the minister responsible
for the department, be allowed to continue her free- spending ways in
blissful peace? What basis is there for the assumption that as long as
the books balance, government handouts can do no harm?

Experience in my own corner of the country demonstrates just how naive
such assumptions really are. Driven, one supposes, by theories about "market
failure", Industry Canada launched a program about three years ago
to develop affordable internet access for rural Canadians. A small community
neighboring mine received a $30,000 grant to set up a volunteer-run internet
service provider (ISP), giving toll-free access to the internet for a
nominal charge. The rationale for the grant was that private sector ISP's
were not providing toll-free service outside of major cities. The federal
government felt it their duty to do more than stand idly by while rural
residents gazed longingly at their urban cousins cruising the information
highway.

For a five dollar monthly fee, I was one of the first to sign up for
this taxpayer-funded service. Initially, accessibility was fairly easy
at almost any time of the day. However, as more and more citizens took
advantage of the opportunity to get on the internet so cheaply, the frequency
of busy signals increased dramatically. Attempting to access the system
during peak evening hours can often mean clicking on my mouse for ten
to fifteen minutes at a time.

Other problems have cropped up as well. The system often slows to a crawl
with heavy usage, and has been crashing frequently. The latest outage
lasted 2 1/2 days. A recent letter from the system's overseers notes that
a proposed upgrade that could increase the system's speed has been rejected
as being too expensive. Even so, fees are now up to seven dollars a month.
Despite the initial largesse courtesy of the taxpayer, the community ISP
now appears to be severely undercapitalized.

After starting out with such high hopes, my local tax-funded ISP is functioning
about as well as Canada's medicare system. By offering service at below-market
prices, such public providers practically guarantee that their systems
will be overwhelmed by excessive demand and eventually break down from
capital starvation, a necessary by-product of economic models that regard
profits as unnecessary.

But unlike medicare, thankfully, private sector alternatives to public
ISP's are not banned by government edict. The primary reason for the "need"
for taxpayer-financed rural internet access, that being the lack of private
sector competitors, was rectified within a year of the handout. I recently
signed up with one of these greedy, profit-seeking exploiters for the
princely sum of $9.95 per month for 30 hours of access, less than three
dollars more than the community service. For that money, I get far quicker
access, fewer interruptions and more features. Because the system is profit-driven,
capital can be marshaled more easily for upgrades to meet future increases
in demand. Because the staff are paid a wage for their work, customer
service is seen as a positive value instead of a burden on a volunteer's
spare time. It's not that there is no role for community- run services
in society; it's just that governments should leave such decisions to
the communities themselves, who should learn to live with whatever resources
they can gather on their own.

This whole experience provides a valuable lesson concerning the ability
of governments to anticipate and react to trends in economic development,
especially in the rapidly moving high-tech fields. Their track record
is, to put it mildly, appalling. Even though we know quite well where
government handouts go most of the time, we oughIt to be focusing on what
actual good, or harm, they do. The money spent usually winds up ineffectively
duplicating what a more efficient private sector would do anyway, thus
constituting a tragic waste of capital. We need to send a much clearer
message to politicians like Jane Stewart: rather than "fix"
or "reform" your inept departments, why not just wind them down
and give the money back to those who earned it in the beginning?

Dennis Rice farms near Starbuck, Manitoba. He is the leader of the
Libertarian Party of Manitoba.